What I Learned About Investing from Darwin by Pulak Prasad is a unique book. It’s a book that marries evolutionary biology and investing. It’s a book that deserves a spot on your bookshelf. It’s a book that will make you a better investor. It’s a book that I will give. When I received a copy, I was curious and got right to it. The title grabs you because it sounds so different from the other investment books. Do you wonder what’s the link between Darwin and investing? I find investing interesting. I find science interesting. Can you blend the two together? Pulak did.
Q1 2023 hedge fund letters, conferences and more
I never heard of Pulak Prasad before. Since 2007 Pulak manages Nalanda Capital out of Singapore, a firm that invests in India. I can tell from the intro that I like Pulak. He’s a long-term investor (everybody says that but he has the track-record). He sees himself as a permanent owner of businesses. He studies businesses not stock prices. He has a sense of humor. He doesn’t take himself seriously. He talks about his many mistakes. He’s a lifelong learner. And I love the parts of the book where he trashes the investment industry. We have a lot of stupid people in this business. It’s embarrassing. In most professional domains that I know of, if you make the errors that I see in the investment field, you don’t get invited on the equivalent of a CNBC to make another market prediction. For somebody like me that has their nose in this investment stuff all day, Pulak calling fund managers idiots makes my day. He has the data to back it up and we all know we don’t need to see it. It reminds me of the Berkshire Hathaway AGM when Buffett just rips apart the money management industry in front of a crowd of money managers and gets cheered for it.
In the introduction Pulak writes “Evolutionary biology is practiced by serious professionals, and the investment field is dominated by amateurs who take themselves too seriously. Knowledge and the quest for truth motivate evolutionary biologist; for most investors, knowledge and truth be damned so long as their 2/20 is protected.” It’s hard not to argue with that.
In general most investment books focus on “how to make money.” That’s why you read them. And of course there are some great books in that field. This book focus on the opposite. Pulak believes that an essential prerequisite for making money is the ability not to lose money. Defense before offense. Errors of omission before errors of commission. It’s about surviving. I share that philosophy. I believe that if you want to invest for a long time, it’s more about surviving than trying to hit homeruns. Sure, with that approach you will miss the occasional “Tesla” as Pulak explains. But it’s by chasing the next “Tesla” that investors commit mistakes and get burned. For every Tesla that makes it, you have a graveyard of companies that don’t make it. I think the stock market returns of the last 3 to 5 years provide a lot of lessons. At the end of the day, it’s a company like good old boring Berkshire Hathaway that’s still chugging along. As for Nalanda Capital’s performance, on page 113 Pulak states that if you would have invested with him at inception you would have made 21.4 times your money over 13.5 years (2007-September 2022). That’s Tesla money right there.
As the title suggests, the book draws lessons from evolutionary biology. The University of Alberta (no affiliation) defines evolutionary biology as a branch of biology where scientists examine the evolutionary processes (natural selection, common descent, and speciation) that led to the current biodiversity of organisms on our planet. In other words, it’s the study of the history of lifeforms on earth.
I’m not an evolutionary biology expert and I won’t pretend to be one. My eloquent defense is the same as Pulak’s defense, which is the same one given by Mary Jane West-Eberhard in the book Development Plasticity and Evolution: I can read.
Pulak looks at key evolutionary biology principles and applies them to investing. The way he does it makes sense. Pulak looks at a particular species in nature and wonders what were the behavioral and physical qualities that ensure its survival, take the key lessons and apply it to investing. He looks at honeybees, birds, sea urchins, bears, foxes and others and looks at how they survived and adapted. Adaptation is the key to survival. Every chapter begins with a quote of Charles Darwin and followed by a similar one by Warren Buffett but in an investment context, obviously.
In his words, this book is about adopting a new mindset for investing. It’s about reimaging investing by applying the time-tested principles of biological evolution. Now if you are a value investor, see stocks as part of businesses, don’t worry about the daily noise, are familiar with Warren Buffett’s two big rules, 1) don’t lose money and 2) don’t forget rule #1, and invest for the long-term, this book is not going to revolutionize your thinking. But it will solidify what you already know with key evolutionary biology principles.
This book is not for everyone. If your mindset is geared towards high-returns, trading and speculating, you will be disappointed. And you have to like Darwin since the investing lessons are Darwin inspired. It’s a deep book. You are not going to grasp everything at first read. It’s one of these books where you read, reflect, absorb, and go back. It’s a “thinking” book. You might not agree with everything he says. You might not agree with the science. I also wonder how it would be if you turned the table around. Instead of an investor reading this book, an evolutionary biologist reads it. It would be interesting to get their take. However, I don’t think you could inverse the process, that is taking key investment principles and applying it to science. Nobody agrees with anything in this field. The closest thing to science would be to study Warren Buffett and Charlie Munger’s brain.
As I mentioned at the beginning, it’s a book that will make you a better investor. It’s also a rare book that merges the world of science and investing (can’t recall a similar book). It’s very informative. I’m certainly more intelligent about Darwin and evolutionary biology.
It shouldn’t be the first investment book you read and it shouldn’t be the last. I enjoyed the book. The findings are great. I hope Pulak gets to write another book.
